Apple Hulu

Apple walks away with their 30 percent cut while Hulu throws in some in-app billable features to cover the loss

Hulu updated it’s iPhone app at a massive cost to the company – it is worth it though. Hulu allows users to sign up to Hulu Plus through the app making Apple an intermediary billing service and reducing Hulu’s burden, but Apple also gets 30 percent of the final monthly bill, which is about $2.50, since Hulu’s subscription fee is $8.

Apple started it’s 30 percent cut in 2011 when it added in-app subscription services. In that time, many content creators were infuriated at the cut Apple was demanding and also that the new rule was not allowing them to use their own billing services.

The fees were widely protested, but now developers are more chill, I guess since they have understood how beneficial the App Store really is. Despite this the in-app billing costs has meant many services using iOS apps have turned to other methods, such as making the users have to leave the app to their website.

Netflix is making its new customers sign up on their website, Spotify has opted to use the in-app billing service but charges its customers at a higher price to cover the costs. Hulu is taking another route and instead of charging new customers on iOS devices the exact rate as subscribers on other platforms, making it a smaller income for them… roughly $29 per year.

The relevance of mobile online viewing and Hulu’s unique model means that the service started out with little to no reaction in the realm of portable viewing, instead Hulu focused the first few years on building out its living room viewing traffic. But more recently, it has seen major mobile growth, making 20 percent of Hulu’s video views as mobile sourced.

Another factor to keep in mind is that Hulu generates a lot of revenue with ads, and plenty of those ads are shown to paying customers. So even Hulu makes less money due to the subsidization on iOS, it may be able to make some of it back by running ads on the app. Hulu also uses ads to cover the costs of free videos, which are used to get people who are not into paying to subscribe initially hooked and turn them into paying subscribers when they want more content. This business model has worked for years, so why not apply it to mobile?